
Element 8 8.1.6_internal_and_external_sour Quiz
Authored by Lenna Alexandre
Financial Education
12th Grade
Used 1+ times

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20 questions
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1.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
Which of the following is an internal source of finance?
Bank overdraft
Retained profits
Trade credit
Venture capital
Answer explanation
Retained profits are an internal source of finance as they are generated from the company's own earnings, unlike bank overdrafts, trade credit, and venture capital, which are external sources.
2.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
What is a disadvantage of using retained profits as a source of finance?
Interest payments
Dilution of ownership
Limited availability
Increased debt
Answer explanation
A disadvantage of using retained profits is their limited availability, as they depend on the company's past earnings. Unlike external financing, retained profits may not be sufficient for large investments or unexpected expenses.
3.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
Which external source of finance involves borrowing money that must be repaid with interest?
Sale of assets
Net current assets
Loans
Retained profits
Answer explanation
Loans are a form of external finance where money is borrowed and must be repaid with interest, making them distinct from other options like sale of assets or retained profits.
4.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
Which source of finance is commonly used for purchasing expensive equipment without owning it?
Leasing
Trade credit
Bank overdraft
Crowdfunding
Answer explanation
Leasing is a common source of finance for acquiring expensive equipment without ownership. It allows businesses to use the equipment while making regular payments, making it a practical choice for managing cash flow.
5.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
What is an advantage of using a bank overdraft?
No interest charges
Long-term finance
Flexible borrowing
No risk
Answer explanation
An advantage of using a bank overdraft is flexible borrowing, allowing you to access funds as needed without a fixed repayment schedule, making it suitable for short-term financial needs.
6.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
Which of the following is an example of owner's capital?
Trade credit
Personal savings
Bank loan
Leasing
Answer explanation
Owner's capital refers to funds contributed by the owner, and personal savings are a direct example of this. Trade credit, bank loans, and leasing involve external financing, not the owner's own funds.
7.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
What is the main disadvantage of debt factoring?
High interest rates
Loss of control
Reduced profit margins
Long-term commitment
Answer explanation
The main disadvantage of debt factoring is reduced profit margins, as businesses must sell their receivables at a discount to the factoring company, which can significantly lower their overall profits.
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